A Democratic House and Republican Senate is the clear consensus view among market participants and political analysts. As such, we would not expect a substantial market reaction to this result. From a policy perspective, we would expect the following under a divided Congress outcome:

Taxes: We expect no major tax legislation under a divided Congress scenario. However, with no major policies due to expire in 2019 or 2020, this would have little effect on our baseline fiscal policy view that tax policy goes from growth-positive to growth-neutral by late 2019. It is likely in this scenario that the Democratic House would try to pass tax legislation that redistributes the 2017 tax cut toward lower income households while also reversing the limitation on the state and local tax deduction. However, it would be very unlikely to attain the 60 votes needed in the Senate in this scenario, if it even came up for a vote.

Spending: Under a divided Congress, we would expect Congress to approve discretionary caps for defense and non-defense spending for FY2020 and FY2021 that are roughly flat in real terms with the spending caps for 2019 that Congress approved earlier this year. This is the assumption underlying our fiscal projections.

Infrastructure: We expect that a major infrastructure program such as the President has proposed would be unlikely under any election scenario, though some funding could be diverted toward infrastructure out of other non-defense spending, as it was this year. While President Trump and congressional Democrats have both supported infrastructure programs, the details differ substantially and, more importantly, Democrats might not be motivated to reach an agreement with the White House prior to the 2020 presidential election.

Trade Policy: A Democratic House would be more likely than a Republican House to block the implementing legislation for the US-Mexico-Canada Agreement (USMCA), but we expect that the deal would eventually be approved. However, potential opposition could prompt President Trump to initiate the withdrawal process from the current NAFTA, forcing the House to choose between the new deal or none at all. In the absence of a legislative agenda in this environment, the White House would be more likely to pursue additional tariffs on imports from China, in our view (implementation of further tariffs by early 2019 is our base case).

Regulatory: Control of the House would have little direct impact on the regulatory agenda, since (1) it would likely be blocked in the Senate and (2) most regulatory changes under the Trump Administration have been carried out with existing authority and have not needed congressional approval. That said, it is likely that regulatory scrutiny of some regulated industries (health care, financial services) could increase through House committees.

Fiscal deadlines: Fiscal deadlines become riskier under a divided Congress. The next spending deadline is December 7, 2018 (before election results take effect) but this is likely to be pushed to either Q1 2019 or September 30, depending on what Congress decides after the election. Under a divided Congress, there will be a substantial risk of shutdown at the next spending deadline in 2019, though whether it happens will depend on the political environment at that point. The debt limit will be reinstated March 1, 2019 and we expect Congress will need to raise it by August. We note that the two most disruptive debt limit debates in recent memory, in 2011 and 2013, both occurred in a divided Congress.

We are not so bearish on further stimulus measures but the Aussie dollar is not waiting around to see as the mega-short pukes positions:

What is the traders’ logic here for the AUD rise? No more US stimulus means US economy weakens means fewer Fed rate rises means eventual DXY weakness?

Seems convoluted to me, compared with this:

If Trump is neutered in the house he will go harder on foreign and trade policy. More trade war. AUD bearish x 10.

In Goldman’s words: “In the absence of a legislative agenda in this environment, the White House would be more likely to pursue additional tariffs on imports from China, in our view (implementation of further tariffs by early 2019 is our base case).”

Just because one is a professor doesn’t make one educated. Really? Spoken like a true Trump philistine. Trump is a symptom of the decline, not the cause but the decline is most apparent just in reading your preposterous attempt at argument. Just because one is a professor doesn’t make one educated, loooool

He is well placed for 2020 from here….the gap in the house is not big and the inevitable recession will now be blamed on the Democrats just in time for 2020 .Meanwhile the Senate results will make it easier for more conservative judges and officials to be put in place.

Once the Democrat House committees with their extensive investigative powers start to expose his business affairs, he will be hovering in the mid 30s in terms of approval. He had both Houses and could manage a high of 45. Hardly Ronald Reagan, is he?

IMO 2020 will be won on how the trespassers approaching the border are handled
IT seems already the national guard has been outnumbered by “Minutemen” , and the contingent of defenders looks to now to be greater in number on the Texas side of the Rio Grande, than the no of trespassers approaching.
And the militia has everything needed and more
“Its Texas isnt it”
by 2020 the blue opposition will be blue in the face from worry in their position as the underdog.
Woo hoo.
I’ll wager Skippy wishes he was there.

If the border was an issue at the top of voters concerns, the House would still be Republican. Exit polling, somewhat predictably had the high cost of health care as the number one issue concerning voters.

“”IMO 2020 will be won on how the trespassers approaching the border are handled””, Wiley I cant see the 2020 election being decided on a what happens at the border. Some people will base their vote on that, not many. Let us see, its all very interesting. Fascinatingly we hear a lot about how sanction hit oil dependent Venezuela is supposed to be the typical socialist state. But the people approaching the border are from failed central American states that followed the US model. Don’t hear so much about how the US economic model has created the social breakdown in those central American countries.

If you guys just zoom out your chart a little bit you will see that the downward trend has hit a floor and has been pretty stable oscillating between 71 and 73 for like 4 months now. The sensational headlines are a bit much when the truth is “AUD pretty stable around long term average”. If you look at a 20 year chart 73c is smack bang in the middle.

Foreign policy is a Presidential power. None of the China tariffs have come through the House. Trade war is still on.

Why would you invest in the US? Because there is no where else worth investing, the same as before the midterms. There is a reason the US is the only place hiking at present. The structural weakness within China has not gone away; just temporarily dressed up with moar stimulus. The structural weakness within Europe has not gone away. Nothing has really changed.

You guys are delusional if you think the democrats are just going to quietly let trump push ahead with his agenda while they have the house, they’ll try and impeach him the next 2 years. Xi is probably sipping a nice cold one right now laughing his arse off.

“The so called booming economy in the US right now was financed by tax cuts, and since that means a shortfall in revenue for the government, the difference has been made up by growing the deficit. That’s alright when you can count on foreign mugs to keep conducting trade in US dollars and recycling those dollars into Treasuries, thus enabling the US to live the high life as it has since the 2nd World War by swapping piles of intrinsically worthless paper (dollars and Treasuries) for goods and services – nice work if you can get it. However, there’s an old saying which goes “Don’t bite the hand that feeds you” and the US has in the recent past not just been biting the hand, but chewing the whole arm off. Many foreigners are indeed corrupt, stupid and gullible – just look at those idiots in Europe allowing NATO wargames right on Russia’s doorstep – it’s like they learnt nothing from WW2, but if you kick them in the teeth hard enough even they start to question their loyalty. US foreign policy since the 2nd World War has basically operated along the following lines with the blunt message to the rest of the world – “You stick with using the dollar in international trade, because if you don’t, we’ll destroy your economy with sanctions (and now tariffs), and if that doesn’t work we’ll send our military over to give you a bloody good hiding”.

I am sure a Chinese or a Russian empire would be that much better. Sure America has made mistakes – and will continue to do so – but under is capitalist influence millions upon millions of people are out of poverty.
Another great power alternative can be much much worse.
At least America doesn’t put a million people into “education camps”

Incoming major global event to reinvigorate American faith in the executive in 3….2…..1……

I think people are completely forgetting that Bolton – a man Rumsfeld, Cheney and Kissinger consider to be a lunatic who should never be let anywhere near foreign policy, and the most likely man to ever start a global nuclear war – is now in the most dangerous position he could be in – given his registration on the Hare psychopathy scale.

Iran sanctions have JUST kicked in – almost as though this date were planned – the consequences are going to be massive and you can all expect petrol prices to go straight through $2 and push $2.50 before the end of 2019.

The US knows the end of the oil age is upon is – global warming plus Tesla have seen to that – so take out the competition, ratchet up the price and engage in the biggest financial windfall in the entire history of the black gold.

Its going to crush all competition and drive the US to the moon. Venezuela is crushed, Saudis are in the gun sights, Iraq, Syria, Libya, Iran all taken out – only Russia remains.